Fiat Chrysler Automobiles and French carmaker PSA Group are exploring the possibility of a merger, in a potential deal that would reshape the global auto industry and create a European powerhouse to rival Volkswagen, reported Bloomberg.
The two companies are holding talks about a merger and under one recent proposal, Peugeot owner PSA would be the acquiring entity and the French side would have an advantage in terms of board seats.
The companies have discussed putting PSA Chief Executive Officer Carlos Tavares in the same role at the combined company while John Elkann, scion of Fiat’s founding Agnelli family, would be chairman.
The talks come several months after Fiat Chrysler and PSA explored a partnership on pooling investment to build cars in Europe and following the collapse of negotiations between Fiat Chrysler and French competitor Renault in June 2019.
The French government will play a key role in any deal because France is one of the biggest owners of PSA, whose brands include Peugeot, Opel and Citroen.
Automakers face tremendous pressure to combine forces and share costs from platform development to manufacturing and purchasing as they battle through trade wars, a global slowdown and an expensive shift toward electrification and autonomous driving.
In Europe, PSA and Fiat Chrysler face the additional burden of new emissions regulations that will force the industry to meet stringent fleet requirements next year.
PSA has been floated as a logical merger partner with Fiat, because of their complementary product and geographic fit, and the two sides talked about a possible partnership earlier this year. However, the Italian-American carmaker instead pursued a deal with Renault.
The talks were called off in June amid opposition from the French government and a lack of support from Renault’s Japanese alliance partner Nissan Motor Company.